I am delighted to share a press release issued yesterday by my client, Overton Power District #5, which details an extensive transmission rate and construction accord with NV Energy. This agreement not only provides for a new 230 kV transmission interconnection to Overton’s retail consumers — addressing a significant reliability concern for the service territory — but it ensures that just and reasonable rates and terms of service govern the past, current and future relationship with Overton’s transmission provider. Congratulations to Mendis Cooper and his fantastic team, Board Chairwoman Metz and the entire Board of Overton on reaching this milestone and having the resolve to see this through. Off to FERC!
I am delighted to share the news of my client, Trico Electric Cooperative, Inc.’s, acquisition of the Avión Solar facility in Marana, Arizona. The Notice to Proceed was issued today, and upon its commercial operations in December 2018 the project will be used to offset approximately 4.5% of Trico’s overall energy needs. This is a bold step into solar by a distribution cooperative.
March Counsel represents Trico in all aspects of the development and financing of the Avión Solar project. The project is being developed in collaboration with Torch Clean Energy. Congratulations to Trico’s and Torch’s hard working team on this milestone!
In its ongoing battle over compensation for its coal and nuclear generating assets in PJM, FirstEnergy sent a letter to Secretary Rick Perry today asking him to immediately intervene and issue an emergency order under section 202(c) of the Federal Power Act. The order would require “(i) the subject baseload nuclear and coal-fired generators to enter into contracts and all necessary arrangements with PJM, on a plant-by-plant basis, to generate, deliver, interchange, and transmit electric energy, capacity, and ancillary services to maintain fuel diversity and grid dependability and resiliency within the PJM region and (ii) PJM to pay such qualifying generating facilities just and reasonable cost-based rates that provide for full cost recovery consistent with ratemaking standards and principles or as otherwise necessary to ensure continued operations. In addition, the order should direct PJM to begin negotiating immediately with such generators on the terms of such supply.”
A copy of the letter can be found here.
Eight (8) emergency orders have been issued under section 202(c) in the last 18 years, including two in 2017 by Secretary Perry. A full list of these section 202(c) orders can be found here.
This effort falls on the heels of the failed attempt for a rulemaking through the FERC, which was converted to a data collection docket by the Commission in January 2018. The RTOs and ISOs submitted their initial comments earlier this month (Docket No. AD18-7), and briefs from the industry are due May 9th.
As blame for the looming shutdown of the Federal government is punted back and forth between Democrats and Republicans, I have received several inquiries as to what will happen with FERC as of 11:59 PM tonight in the absence of a Continuing Resolution passed by the Senate. The short answer is: FERC has a plan. In fact, you can read it here.
In a nutshell, FERC will use its available funds to maintain normal operations, and when such funds are gone, will reduce its staff to 49 employees, 18 contractors and the 5 Commissioners (from a total of nearly 1,500 employees) to perform “excepted” operations. These excepted activities include: (i) formal actions by the Commission, (ii) inspection of hydroelectric and LNG projects, (iii) reliability monitoring and threats to infrastructure, (iv) market monitoring (for urgent matters only), (v) legal advice to the Commissioners and excepted personnel and matters before courts that are not stayed or otherwise deferred, and (vi) maintaining IT and security for the Commission’s facilities.
Business will be as usual on Monday. But as the Commission starts it shutdown, FERC will let the public know when it will cease accepting filings and postpone deadlines, or otherwise curtail its services, and it will also advise as to when it will furlough employees. FERC will then whittle itself down to the excepted activities. Plan accordingly!
This will certainly not be the first government shutdown affecting FERC. Over the last 4 decades, there were seven very short shutdowns under President Reagan, one under President Bush, two under President Clinton, and one under President Obama. The longest two shutdowns by far are the most recent (21 days in 1996 under President Clinton and 16 days in 2013 under President Obama).
On January 10th, a group of attorney generals, state agencies and consumer advocates from 16 states filed a letter with FERC requesting that the Commission look into the impact of the recently enacted Tax Cut and Jobs Act on regulated electric, natural gas and oil pipelines. A copy of the letter can be found here.
The letter expresses concern that, as a result of the reduction in the corporate tax rate from 35 to 21 percent and as a result of ratemaking treatment associated with accumulated deferred income tax (ADIT) recovered from customer, FERC-jurisdictional rates are excessive and producing windfall to certain utilities. Citing FERC Order No. 475, a 1987 order addressing the changes resulting from the Tax Reform Act of 1986, the states “call[ed] upon the Commission to use its experience and expertise, with stakeholder input, to determine appropriate procedural mechanisms to discover information about the scope of over-collections at issue, the types of voluntary rate reductions or refunds that can be implemented by the Public Utilities in an expedited manner under existing Commission rules and precedent, and the best way to ensure that customers are not harmed by any delay in making the appropriate changes.”
These windfalls are occurring in both stated and formula rates. While formula rates typically input the prevailing federal income tax rate and will ultimately adjust (if the formula is one that contains a true-up mechanism), the level of detail to appropriately account for ADIT is typically lacking. Stated rates, or black box rates resolved through settlement, would not make any such accommodation. For example, a FERC-regulated open access transmission tariff rate may have been resolved in 2013 by settlement, and presumably predicated on the prevailing federal tax laws at that time. Such rates will not change until adjusted by a filing by that utility or a complaint by interested stakeholders (or the Commission itself). FERC’s principal statutes (the Federal Power Act, the Natural Gas Act, and the Interstate Commerce Act) provide the ability to get relief, but that relief is prospective.
Some utilities are working diligently to get ahead of the issues and provide relief to their customers. The January 10 letter cites to efforts by regulated utilities to reduce retail rates to give back customers any savings garnered from the tax change.
Undoubtedly, the Tax Cut and Jobs Act will be adding to the Commission’s significant caseload in the months and years to come, and result in a significant number of rate cases.
FERC held its first open meeting with Chairman McIntyre at the helm and a full complement of Commissioners at his side. A series of staff appointments and key staff retirements were announced, and a full complement of orders were voted on, both by consent and discussion agenda. All the Commissioners voted unanimously on the orders issued. The meeting was peppered with some levity, including Commissioner LaFleur presenting Commissioner Chatterjee with a Ziploc bag of pulverized coal in recognition of his brief tenure as Chairman and his affinity for the DOE-initiated Grid Reliability and Resilience Pricing rule that the Commission will act upon in January.
Substantively, the Commission touched on three major policy initiatives:
- FERC issued a Notice of Proposed Rulemaking (NOPR) under Section 215 of the Federal Power Act directing NERC to modify the existing CIP Reliability Standards to improve reporting of cybersecurity incidents that compromise, or attempt yo compromise Electronic Security Perimeters or Electronic Access Control or Monitoring Systems.
- FERC closed its NOPR on Fast Start Resource Pricing without issuing a rule applicable to all RTO/ISOs, and instead initiated three Section 206 proceedings affecting NYISO, PJM and SPP, with customized issue identification for each, and initial briefs due in 45 days and reply briefs 30 days thereafter.
- FERC announced that it will make review of its 1999 Policy Statement on Certification of New Interstate Natural Gas Pipeline Facilities a priority.
Chairman McIntyre announced his initial staff appointments, comprised of a team of existing staffers from the Office of Electric Markets Regulation, Office of General Counsel, and Office of Enforcement. He did not make any announcements of other key appointments, including who will lead the Office of Enforcement or who will replace retiring Chief Accountant Bryan Craig moving forward.
As this will likely be my last insight of 2017, I wish everyone a Merry Christmas and Happy New Year.
By pure happenstance, I was at FERC today for a settlement conference and was able to watch Mr. McIntyre be sworn in as the next Chairman of the FERC. Apologies for the grainy cell phone video and the heavy breather that apparently was picked up on my camera audio, but I wanted to share his remarks with you since it did not appear that there was any other video being taken in the room. If you have trouble watching through this post, you can click here and you will be taken to Vimeo.
Richard Glick was sworn in as a Commissioner at FERC this morning, according to a FERC press release. His term will expire in June 2022. Mr. Glick will join Cheryl LaFleur as the Commission’s Democratic presence.
Kevin McIntyre is still waiting in the wings to take his seat as a Commissioner and Chairman. As of this morning, he is still listed on the Jones Day website as a partner and energy practice leader. While some have developed intricate conspiracy theories related to current Chairman Chatterjee’s pro-Administration position on the Grid Resiliency and Pricing Rule (Docket No. RM18-1, which will see action by December 11th), Mr. Chatterjee himself is simply chalking up the delay to completion of paperwork and Mr. McIntyre unwinding his professional obligations.
As a practitioner, it has been great to see the Commission back in action, and clearing its significant backlog of orders caused by the lack of quorum. With a tax bill and budget showdown looming, it would be a shame to have that progress hindered by a Federal government shutdown, which could occur at midnight on December 8th.
Now we know “What’s Going on….” FERC issued a press release this afternoon, reading as follows:
Senate Confirms McIntyre, Glick to FERC
The U.S. Senate has confirmed the nominations of Kevin McIntyre and Richard Glick to join the Federal Energy Regulatory Commission (FERC). McIntyre will serve as Chairman.
McIntyre, co-leader of the global Energy Practice at the law firm Jones Day, will serve out the remainder of a term that ends June 2018 and a full term that ends June 2023. Glick, general counsel for the Democrats on the Senate Energy and Natural Resources Committee, will serve out the remainder of a term that ends in June 2022.
FERC Chairman Neil Chatterjee congratulated McIntyre and Glick on their confirmation.
“I am very pleased to welcome Kevin and Rich to the Commission, and I look forward to working with them on behalf of the American people,” Chatterjee said. “I’ve enjoyed getting to know Kevin through the confirmation process and am eager to start working with him, and it will be great to reunite with Rich Glick, my former Senate colleague. Both Kevin and Rich bring years of experience and knowledge to the significant issues before the Commission and, importantly, their arrival restores the Commission to full strength.”
It will be interesting to see what deal was struck to remove the hold placed on Mr. Glick by Senator Inhofe. But FERC is back to a fully populated Commission, which has not been the case since October of 2015.
With the Federal Energy Regulatory Commission now several weeks into collecting comments on DOE Secretary Rick Perry’s “rocket rulemaking” to address grid resiliency in organized capacity markets (FERC Docket No. RM18-1-000), one may wonder what has happened to the two commissioner nominations pending before the Senate, Democrat Richard Glick and Republican and soon-to-be Chairman Kevin McIntyre. Both nominees passed through the Senate Committee on Energy and Natural Resources’ review with unanimous bipartisan support in September. The nominees are needed to fill out the five-member Commission with three Republicans and two Democrats. And more importantly, the nominees are needed to help pour through the 690 sets of comments in the docket. So why haven’t they been seated yet?
(Spoiler Alert: Politics!)
As part of its confirmation of Commissioners Chatterjee and Powelson in August, Senate leaders struck a deal to advance the remaining Democrat and Republican nominees in tandem. President Trump announced his formal appointment of McIntyre and Glick to the Commission on August 2nd. This cleared the way to Senate confirmation of Chatterjee and Powelson the very next day by voice vote, and the FERC quorum was restored to everyone’s delight.
Glick and McIntyre appeared before the Senate Committee on Energy and Natural Resources a month later, on September 7th, and that committee promptly voted out and reported to the entire Senate for consideration on September 19th. At that point, everything was smooth sailing. Senator Murkowski proposed to confirm the nominations by unanimous consent….and fellow Republican Jim Inhofe – a Senator from energy resource rich Oklahoma – objected. Senator Inhofe’s objections have absolutely nothing to do with FERC or its agenda. Rather, as Senator Inhofe explained:
“Given the unprecedented obstruction by the Senate Democrats to President Trump’s nominees, I could not allow the confirmation of the pending Democratic FERC nominee [Glick] to move forward without more nominees included as well. The price was too low, particularly given the fact that there is an agency with only one political appointee confirmed.”
The agency he was referring to was the Environmental Protection Agency, an agency headed by fellow Oklahoman Scott Pruitt. Senate Democrats objected strongly to Michael Dourson to run the EPA chemicals office, and Bill Wehrum to lead the agency’s air office. This past Wednesday, October 25th, the Senate Environment and Public Works Committee voted along party lines (11-10) to advance the nominees, together with Matthew Leopold to be assistant administrator in the EPA general counsel’s office and David Ross as assistant administrator for the Office of Water. In all, there are 15 positions within the EPA that the Senate must confirm. Within FERC, it is only the 5 Commissioners that the Senate vets. Other positions, like the chief counsel, are selected by the Chairman, and Chairman Chatterjee has already done so.
With one roadblock down, it is still unclear if a deal that packages the EPA and FERC nominees, as well as other nominees, is in the works. Senate Democrats do not seem to be backing down over their objections to the EPA nominees, and there is a pending legal challenge to the Trump Administration under the Federal Vacancies Reform Act because Mr. Dourson is already working at EPA as a “special advisor” even as he awaits his Senate vote. Similar legal challenges were made under President Obama’s administration. Senate Democrats are also bemoaning Dourson’s ties to the chemical industry that he will be charged with regulating.
With the two-month delay in confirming the first two vacancies on the Commission, the debate over tax reform and the budget, and the glacial pace that the Senate is handling the other business before it, one would not be surprised if we will do not see the Commission restored to its five-member panel for several more months. Chairman Chatterjee is moving ahead. He testified before Congress in September and has separately laid out an agenda to address natural gas pipeline and hydroelectric project review, PURPA, energy storage, transmission incentives, and cybersecurity, among other issues. It may be that the DOE “rocket rulemaking” is considered by only three Commissioners, a fact that may sway the outcome given that the two Commissioners waiting in the wings have already stated that their charge in regulating the energy markets through FERC is not fuel specific, which directly contravenes Secretary Perry’s coal and nuclear-centric rule.
But for now, we’ll have to wait to see “what’s going on.”